PRC-2 · Chapter 4 · Question 31 of 60
A loan of Rs. 1,000,000 is to be repaid over 10 years at a 12% annual interest rate. The repayment schedule follows an 'equated monthly installment' (EMI) structure. This form of payment is mathematically classified as:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) An ordinary annuity.
Explanation
An annuity is a sequence of equal payments made at regular intervals. Since EMIs occur at the end of each month for a fixed duration, they represent an ordinary annuity.
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